May 3, 2022

When Do You Give a Pay Raise?

By Paul Daniels

How do you accept or turn down a request for a wage increase in your business?

This month it’s my turn to start a discussion with Paul Bieber and give him a chance to rebut next week. An issue that we hear all the time is the challenge of finding good people. The other side of this is how we keep our employees, especially when they ask out of the blue for a raise. I was surprised at how many articles I found addressing this issue. Most of them had two main points: You don’t want to offend them or lose them by declining their raise request. The challenge is how to keep your employees motivated—and on the job–without approving a raise.

An article I found on listed five key points that summarized most of what I found online. 

  1. You don’t want to say no on the spot and risk offending someone, so hear what the employee has to say. Let them point out why they feel deserving of a little extra padding in their paycheck.
  2. These employees will present their cases through rose-colored glasses, so make sure you go through their history to check performance.
  3. Search to see what other employers are paying for similar jobs. Is the pay competitive? If your employee’s earnings are comparable to similar positions on the market, you can cite this as to why they don’t deserve a raise.

Once you’re armed with all the facts—including your employee’s overall job performance, salary demands and the market rate for the job position—it’s time for a meeting.

  1. Tact is key. It’s never pleasant or easy to turn down an employee’s request, so act accordingly. Remove emotion from the equation and let your employee know you thought about this and did your research. Presenting the facts will help illustrate why you’re not granting a raise at this time.
  2. Before you let your dejected employee leave your office, it’s up to you to dispense some good career advice. Let them know they have an essential position on the team and offer tips on boosting future performance to ensure a raise at the next employee review. If done correctly, you will create a more invested employee whose raise request was not rejected, but merely postponed to a date in the near future.

Number five is the key to keeping a strong, motivated workforce. You need a clear path in your business for employee growth and advancement. In my past life, my boss always told me that it was his job to grow the business to give everyone a path to advance. If your team members understand that by helping the company succeed, they will be rewarded, they will stay motivated and help the organization grow.

It’s all yours Paul B. What’s your take?